When it comes to major remodeling, everybody has an opinion about where you should put your money and how much you can expect to get back on it. Kitchen renovations always pay for themselves! No, it's bathrooms! No, family rooms! Unfortunately, most rules of thumb for fixing up your house aren't worth a pound of sawdust. First, well-intended articles about which projects to undertake are poor guides because different houses have different shortfalls. The person who knows best what your own house needs is you, perhaps with the advice of a well-plugged-in real estate agent and an architect. Second, contractors and other interested parties often overstate how much you'll get back from what you spend. Most studies show that very few remodeling projects add as much to the value of a house as they cost. So don't spend on an elaborate renovation with the idea that it's as good as putting money in stocks and bonds, which (in the long run, anyway) tend to have a positive return on investment.
Before plans are drawn up, you need to answer two questions: What does your house really need? Equally important, what do you need? If you plan to sell soon, stick to small improvements that fix glaring flaws. If you hope to stay put for many years, you can indulge yourself with more idiosyncratic projects that appeal to you regardless of whether they add to resale value. For many clients, "remodeling is a really strange mix of a business deal with personal and family emotions tied to it," says David Duncan of Needham Duncan Architecture in Madison, Conn., which specializes in residential and light commercial projects. He says the more you can clarify ahead of time what you want to do and why, the better your chance of success.
DARK? CUT DOWN A TREE
If resale value concerns you, the first step before remodeling is to call in a trusted real estate agent who can tell you what buyers in your area are looking for and where your house matches up poorly against the competition. For example, adding a bedroom isn't always a good choice -- but it might be if your house has fewer bedrooms than others in the neighborhood. If you plan to move soon, most agents will advise you to focus on making your house bright, airy, and uncluttered while repairing anything that's broken or leaking. Stick with low-budget projects that will have broad appeal, like fresh paint in light, neutral colors. Anat Eisenberg, a real estate agent in Tenafly, N.J., recommends tearing out wall-to-wall carpeting if you have hardwood floors beneath and painting the exterior in a light color. "It's a visual distortion," says Eisenberg. "People will perceive the house as larger."
If you're staying longer, raise your sights. An architect may point you toward a solution you hadn't thought of. Too often, says Louis Wasserman, an architect with Louis Wasserman & Associates in Milwaukee, "people have a problem and they don't quite know how to solve it, so they solve it by adding space onto space that didn't work to begin with." Instead, moving a wall might help traffic circulation at little cost. Some fixes are even easier. Says Wasserman: "If the living room is dark, maybe you just need to cut down a tree."
At the other extreme, if a house's flaws are obvious and serious, you might be better off selling it as is or tearing it down and starting over. Sinking a lot of money into an unworthy house is like putting lipstick on a pig. You're not going to fool buyers. "A lot of older homes are on beautiful sites where the value is really in the land," says Margaret Muir, a realtor with Page-Taft Real Estate in Madison, Conn., who has worked with Duncan. "Sometimes owners work against themselves. They try to make a house into something it was never meant to be."
Remember as you plan your remodeling that most house buyers are walking around with a mental checklist of must-haves. If your house is missing even one item from the list, it risks being disqualified from consideration. So if you want to convert a fourth bedroom into a den or study, make sure the next owner can easily make it a bedroom again. Remember that anything you add that isn't on the buyer's checklist -- even something attractive like a solarium -- won't be highly valued. So if resale is a primary concern, stick to the basics. At best, a unique home will stay on the market longer until the rare family that shares your taste comes along. At worst it will fetch a lower price than a more conventional home.
KEEP UP WITH THE JONESES
How much should you spend on the big items, kitchens and bathrooms? Enough to keep up with the Joneses but not much more. In other words, if everyone else on the street has granite countertops, then you should, too. But don't go for the gigantic professional stove if you never cook and nobody else on your street has one. Likewise for bathrooms. Adding a bathroom boosts you into a higher tier of properties in the minds of those homebuyers with checklists. But there's no need to make it fancy, says Doug Aleshire, a home designer at All-Pro Home Services in Royal Oak, Mich. For example, says Aleshire, "a whirlpool will not reap a good return."
As you remodel, try to preserve your house's character. Too many people "remuddle," destroying whatever charm their house had and harming resale value. Wasserman, the Wisconsin architect, and his wife and partner, Caren Connolly, specialize in helping people remodel old bungalows, which though small are often replete with stained glass and ornamental woodwork.
A good way to boost the return on your renovation is to avoid unnecessary costs. You can lower expenses by focusing work on just one section of the house. If you have a two-story house, try to make any additions two stories as well. You'll need a foundation and a roof anyway, and the incremental cost of one more floor is comparatively small. Also, think ahead about how you'll use the space from day to day. Is there a place for the kids to drop their backpacks? If the little things matter to you, then they will probably matter to the next owner as well.
Some homeowners will then put an extravagant free-standing tub in their master bathroom or a bowling alley in the basement because it's what they've always wanted. The rest of us try to strike a balance -- as a consumer of housing and as a would-be seller. "I'm always trying to wear both hats," says Muir. "If you go in with eyes wide open and make smart choices," she says, "you can make some nice, happy compromises." That's how to be a model remodeler.
By Peter Coy